UK wage growth ‘hugely positive’ for travel, industry told

The “underlying fundamentals” of the UK and world economies are stronger than may appear given “the geopolitical state of the world”, a senior investment banker has assured industry leaders.

Will Hobbs, head of multi-asset wealth at Barclays UK Wealth Management, told the recent Barclays Travel Forum in London: “Generally, we’re fighting pessimism fed by social media and worries about the geopolitical state of the world.”

Yet he suggested “the underlying fundamentals of the global economy, including the UK” don’t warrant such pessimism.

Hobbs described annual wage growth in Britain as “hugely positive” despite inflation, saying: “Real wage growth [in the UK] has not been this positive for a long time.”

Latest Office for National Statistics figures released last week showed annual wage growth excluding bonuses remained at 6% between January and March, the same as for the three months to February.

Hobbs noted “elements of underlying inflation will concern” the Bank of England, but he suggested the Bank could begin to lower interest rates this summer ahead of the US Federal Reserve cutting rates.

The Bank of England monetary policy committee voted to maintain UK bank rate at a 16-year high of 5.25% earlier this month. But Hobbs said: “The Bank will probably go ahead of the Federal Reserve with three or maybe four cuts [in rate] before the end of the year.”

Asked whether this might trigger a fall in the exchange rate of the pound against the dollar – which already makes the US an expensive destination for UK travellers – Hobbs said: “The currency will sink a bit, but the dollar is at an extreme level. The US economy has been motoring. We may see a bit of movement, [but] we shouldn’t be too worried.”

Hobbs also downplayed fears that the UK general election, expected in the autumn, could have a negative impact on the economy.

He said: “At the economic level, I’m not sure it will be that big a deal. The UK is heavily indebted and people lending to government look for orthodoxy and sobriety [whoever wins].”

However, Hobbs warned industry leaders not to expect a return to low interest rates or to the kind of economic growth rates which preceded the global financial crisis of 2008-09.

He argued: “Rates will settle higher. It was the decade prior to the financial crisis that was unusual, [and] I would guard against using the last 10-15 years as a template for what comes next.”

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